TSX edges higher before Greek vote
The Toronto stock market closed higher in light trading Friday ahead of a weekend debt referendum in Greece, while the loonie slid lower amid fears about a recession in Canada. The S&P/TSX composite index closed up 44.40 points at 14,682.39 after rising almost148 points the previous two trading days.
But Canada’s main market was still down sharply on the week — and virtually flat for the year to date — courtesy of an almost 318-point drop Monday on fears of possible knockon effects from Greece’s debt woes.
New York markets were closed Friday for U.S. Independence Day, but not before also putting in a losing week blamed largely on the uncertainty over Greece that produced its biggest single loss of the year on Monday.
The Dow Jones industrial average finished the week down 216.57 points, or1.2 per cent, and is in slightly negative territory for the year. The S&P 500 index and the Nasdaq were also down more than 1 per cent on the week, although both are still positive year to date.
Philip Petursson, managing director at Manulife Asset Management, said he expects that North American markets will rebound from the losses, regardless of whether or not a deal is reached between Greece and its creditors.
“North American markets fell over the past couple of weeks in sympathy with what’s going on in Europe. But really, one shouldn’t have anything to do with the other,” he said.
Meanwhile, the loonie continued to drift lower, down 0.09 of a cent (U.S.) at 79.62 cents amid growing concerns that Canada may be in a recession, largely as a result of the plunge in oil prices over the past year.
“I think that the Canadian economy is going to continue to face challenges over the next couple of months, if not couple of quarters, and that is in part going to be reflected in the TSX,” Petursson said.
Fears of a recession — defined as two consecutive quarters of contraction in gross domestic product — have increased speculation that the Bank of Canada might reduce its trend-setting interest rate, with neg- ative consequences for the loonie.
On the commodity markets, oil prices continued their recent downward spiral. Around 4 p.m. Friday, the August crude contract was down $1.41 to $55.52 a barrel, a level last seen in mid-April. The August gold contract was up $4.30 at $1,167.80 an ounce.
Among investors, all eyes will be focused on the outcome of this Sunday’s referendum in Greece on whether to accept or reject the austerity measures demanded by creditors in exchange for bailout loans.
The government of Prime Minister Alexis Tsipras contends a No vote will strengthen its bargaining position in dealing with the country’s sovereign debt load, which now totals more than 300 billion.